The Managers of Conch, Inc If the Reciprocal Method Is Used, the Equation Representing the Accurate

question 66

Multiple Choice

The managers of Conch, Inc. want to determine the most accurate allocation of support department costs to operating departments. To make this allocation, the accounting department has collected the following data: $\begin{array}{llll}&&\text { Services Provided By }\\& \underline{\text { Computer}}&& \underline{\text { Cafeteria} }\\\text { Direct costs } & \$ 55,000 & & \$ 35,000 \\\text { Service provided to: } \\\quad \text { Computer department }&-- & & 15 \%\\ \text { Cafeteria } & 10 \% & &-- \\\text { Operating department 1 } & 50 \% & & 40 \% \\\text { Operating department 1 } & 40 \% & & 45 \%\\\end{array}$
If the reciprocal method is used, the equation representing the total cost of the computer department is:

• A) Computer costs = $55,000 + (0.15 × cafeteria cost)
• B) Computer costs = $55,000 + (0.10 × cafeteria cost)
• C) Computer costs = $55,000
• D) Computer costs = $55,000 + 0.10 × ($55,000 + 0.10 × computer cost)